Focus on Russia, the land of unknown yet inventive start-ups

A country of brilliant scientific innovation has produced an array of new tech companies since the late 2000s. But these inventive start-ups remain virtually unknown outside the country’s borders.

Credits: Shutterstock / Pavel L Photo and Video

Russian innovation has a rich history of discoveries and technical development going back several centuries. Even though Russian science has gone through some soul-searching in recent decades, notably with many scientists leaving the country after the break-up of the Soviet Union, “new companies take root in this long-standing tradition,” says Adrien Henni, chief editor at the online magazine East-West Digital News. “Russia is home to some of the world’s top developers and engineers,” adds Julien Nicolas, head of communication at the start-up accelerator NUMA Moscow.

Since the late 2000s, Russia has seen the emergence of thousands of start-ups, active primarily in information technologies but also in the aerospace, energy and biomedical industries. The 2015 Global Startup Ecosystem ranking by the US firm Compass puts the number of tech start-ups in Moscow at around 3,000.

In a move to diversify the economy away from its dependence on raw materials, the government has invested heavily in the tech ecosystem. Incubators have been set up, especially near universities. This development has caught the attention of foreign accelerators and start-up competitions such as MassChallenge, Seedstars World and NUMA. “The Russian tech innovation scene has grown spectacularly in the past five years,” says Pekka Viljakainen, a Finnish advisor for the Skolkovo technology park, a large-scale government project designed to stimulate innovation.

And this trend is not limited to the country’s capital. “It’s growing through-out Russia,” says Viljakainen. Most developments revolve around Naukograds, those Soviet-era “science cities” in which thousands of physicists, chemists and mathematicians would live and work. Novosibirsk, Tomsk and Kazan are today’s leading regional hubs.

The phenomenon is hard to see from outside the country. “Most start-ups remain focused on the domestic market,” says Henni. Since the beginning of Russia’s economic crisis – the fall in oil prices, Western sanctions following the annexation of Crimea and the devaluation of the rouble – many entrepreneurs have emigrated to start their businesses abroad. “An estimated 1,000 start-ups have been founded by Russians in the US in the past year and a half. Facing an anti-Russian atmosphere that sometimes borders on hysteria, many remain evasive about their background.”

Another repercussion of the crisis is that funding, especially from foreign countries, has been cut off. But Viljakainen believes these hardships have also had a positive impact. “It has pushed talented young people to launch their own projects to earn a bit more money and forced large companies to invest in new technologies and take notice of start-ups.”

Four Russian projects with international reach

Safe messaging

Launched in 2013, the instant messaging application Telegram now has 100 million users a month in 200 countries, sending 15 billion messages daily. And 350,000 new customers are joining every day.

Telegram is special because it allows users to send encrypted messages that are not stored on its servers. Pavel Durov, the founder of VKontakte, dubbed the “Russian Facebook” with its 380 million users, is behind the project. His brother Nikolai, a mathematician and computer programmer, developed the encryption protocol. Durov now lives as an international nomad, flitting from city to city without revealing his whereabouts. A staunch defender of privacy protection, he developed Telegram as a means of communication that would operate under the radar of the Russian authorities, as he was one of their targets.

Government attempts at censorship – not only in Russia – have made the service popular. About a quarter of the population in Iran uses it. After the terrorist attacks in Paris, Telegram was accused of being a communications tool for jihadists. “Just more publicity,” says Adrien Henni of East-West Digital News. “After that, a lot of people downloaded the app out of curiosity.”

E-commerce for anyone

Ecwid lets any company add an online shop to its website, mobile platform or social media page. Quick and easy to use, the service is designed primarily for small and medium-sized businesses that lack the resources or expertise to open an online shop. Available in 50 languages, the plug-in has been used to build more than one million shops in 175 countries. Partnerships have been formed with Facebook, PayPal and eBay.

The start-up was founded in 2009 in Ulyanovsk, a city more than 500 kilometres from Moscow that is best known as Lenin’s birthplace. Ecwid’s founder, Ruslan Fazlyev, has been into programming since he was a child and studied information technology at the local university. Ecwid is not Fazlyev’s only company. In 2000, at age 20, he created X-Cart, the world’s first e-commerce platform to use PHP scripting language. Fazlyev is also behind the regional telecommunications operator SimCom.

With offices in Ulyanovsk and near San Diego, California, Ecwid has maintained firm roots in Russia while being successful internationally. It employs more than 100 people.

Smart face recognition

VisionLabs has developed face-recognition technology based on computer vision and deep learning. Founded in 2012, it operates out of the Skolkovo technology park near Moscow and has since figured prominently in several international competitions. Its expertise has even gained attention from Facebook and Google. In June, the two US giants chose VisionLabs to design an open-source computer vision platform.

The main programme can be used by companies to recognise its customers in photos and videos. This solution is aimed at banks and stores to meet identification and security needs. Another product combines face recognition with customers’ history of online purchases. Stores can build profiles of their customers and personalise their services.

Sistema Venture Capital, which has contributed funding for the start-up, says that VisionLabs also features solutions with potential applications in the internet of things, health care, transportation and virtual reality.

Low-cost satellites

Dauria Aerospace, founded in 2012, is the first 100% privately-owned Russian space company. It develops and manufactures small, low-cost satellites used for Earth observation and communication.

The start-up draws on the expertise of the institutions that have long dominated the space industry in Russia. Three of its satellites are currently in orbit. Two other devices have passed test flights, and four additional platforms are in the development phase. Dauria Aerospace currently has orders worth $300 million.

Forced to scale back due to political tension between Russia and the West, the company closed its European and US offices in 2015. But it also signed a huge new contract with Chinese investment fund Cybernaut, which has invested $70 million to build 10 satellites for the Urban Observer project, designed to monitor life in the world’s 100 largest cities.